Monday, March 15, 2010

Popular Holdings Limited, is it a payback time stock?

Recently, when I was catching up with an ex-colleague and we happened to talk about Popular Holdings stocks. He said nothing buy give negative views on the company. And the reason? Well, he said that his wife bought it at $0.30 and until now has dropped to hovering around $0.155 and $0.16. So, my next question was, does she know what she is buying into? His reply, "Nope, just know that it's popular bookshop and that it's cheap at $0.30. Now, you know what I mean by know the right price to buy a stock/own a business.

Well, let's see if Popular Holdings qualifies as a payback time stock?

Level 1 Check
Does the company mean anything to me? Well, I know it sells books and properties.
Does the company has a strong moat? I know that they have 132 bookstores in Singapore, Malaysia and Hong Kong. And I also know that when people think of buying books or stationaries, they will think of Popular Bookstore.
Does the Management do a good job with investor's money? From past records, returns on Equity has been above 12%, hence I think the Management has done a good job.

Level 2 Check
Now that the company has passed the level 1 check, what should we do now?
We look at these numbers for the past 5 years. Sales, Net Profit, Equity and Debt
Sales rises from $347mil to $450mil.
Net Profit rises from $11mil to $22mil (doubles in 5 years, hence 15% compounded for past 5 years)
Equity rises from $125mil to $154mil.
Debt is currently at $19mil, where they can actually paid back within 1 year. (must be less than 3 years)

Looks like Popular Holdings is a payback stock to me.
Market Cap for Popular now is approximately $100 million (Share price x Number of shares).
Now with this $100 million and current net income of $22mil and growing at rate of 10%, the payback time is slightly less than 4 years. Wow, that's a very good business to own. Hence, it's a good company to stockpile!

Last but not least, Popular Holdings reported their 3Q results, ending 31 Jan 2010, on 12 March 2010. It's net profit soars by a whopping 47.5%. Her EPS for the first 3 quarters added up to S$0.035. Her Returns on Equity is 14.7%, according to equity of 23.75 cents per share.

Anyway, it's current price of $0.16 is already a discount compared to it's equity of 23.75 cents.

Now, you can try to buy 10,000 shares at $1,600 and see if you can double that in 4 years. Or else just let it pass.


1 comment:

  1. I just follow your lead and buy...

    You do the analysis well. I can slack...

    Btw can you expound on what is payback time a bit more?

    Your are suppose to lend me the book. GTL